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Diagonal mergers and foreclosure in the internet

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  • Emanuele Giovanetti

Abstract

We study the incentives for a ''diagonal'' merger between two Internet Service Providers, one a wireless retail only ISP in two origination markets, and the second a vertically integrated wired retailer in one market and an upstream provider in the other. The merger’s effects depend on differentiation in access modalities; only with high differentiation does the merger have positive welfare effects. We focus on post-merger foreclosure, which, when it happens, only takes place in the market where the merger is horizontal and not where the merger is vertical. The Network architecture used is meant to capture Internet routing.

Suggested Citation

  • Emanuele Giovanetti, 2005. "Diagonal mergers and foreclosure in the internet," Working Papers 80, University of Rome La Sapienza, Department of Public Economics.
  • Handle: RePEc:sap:wpaper:wp80
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    References listed on IDEAS

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    1. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April.
    2. Waverman, Leonard & Reynolds, Clark W., 1990. "Introduction," North American Review of Economics and Finance, Elsevier, vol. 1(2), pages 181-186.
    3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    4. Giovannetti, Emanuele, 2002. "Interconnection, differentiation and bottlenecks in the Internet," Information Economics and Policy, Elsevier, vol. 14(3), pages 385-404, September.
    5. Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick & Tirole, Jean, 2003. " Internet Interconnection and the Off-Net-Cost Pricing Principle," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 370-390, Summer.
    6. Waterson, Michael, 2003. "Consumers and Competition," The Warwick Economics Research Paper Series (TWERPS) 679, University of Warwick, Department of Economics.
    7. Giovannetti, Emanuele & Ristuccia, Cristiano Andrea, 2005. "Estimating market power in the Internet backbone. Using the IP transit Band-X database," Telecommunications Policy, Elsevier, vol. 29(4), pages 269-284, May.
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    More about this item

    Keywords

    Mergers; Internet; Foreclosure; Network Industries.;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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